Twitter Inc’s (TWTR) Biggest Long-Term Hurdle Is Stubborn MAU Growth; Top Analyst Initiates Hold

Top analyst Youssef Squali of SunTrust sounds off with a cautious report on Twitter Inc (NYSE:TWTR). The analyst notes that while the social networking giant continues to struggle with engagement levels and ad pricing, management is working hard to implement new features on the platform and compete for advertisers. The analyst maintains weak expectations for revenue growth, but points to a number of metrics that may signal better times to come.

Twitter has taken a number of steps to refocus on its “core product” says Squali. The analyst references the fact that “Twitter discontinued Vine, moved to eliminating the ‘buy’ button and Dashboard, sold Fabric and de-emphasized Tell Apart.” While Squali believes “Twitter’s decision to refocus on its core product is the right one” the analyst opines that “we are projecting a 4% revenue decline in 2017 to ~$2.4 billion… due to headwinds from the de-emphasized products and tougher live video comparables.” Squali is confident that “The shift to higher priced ad formats, such as video, has helped monetization, and the launch of reservation and CPM-based ad buying has also improved the experience. This trend has offset some of the declines in the Promoted Tweets product/direct response ad formats.”

A key factor to unlocking the giant’s long-term success hinges upon building up MAU, which lies at around 300 million, but is lacking in growth momentum. The analyst writes that “While MAUs are stubbornly flattish, DAU growth has remained strong, indicating improving engagement. We believe higher engagement should lead to better monetization ST, but sustaining the latter would require a resumption of MAU growth, driven by compelling content, successful product launches and easier on-boarding, all a work-in-progress.”

In summation, Squali finds the giant is a story of “much to prove still,” initiating a Hold rating on TWTR stock with a price target of $16.00.

Youssef Squali has an excellent TipRanks score with a 73% success rate and a high ranking of #27 out of 4,627 analysts. Squali realizes 19.6% in his annual returns. When recommending TWTR, Squali earns 16.2%.

TipRanks analytics demonstrate TWTR as a Hold. Based on 20 analysts polled by TipRanks in the last 3 months, 2 rate a Buy on Twitter stock, 12 maintain a Hold, while 6 issue a Sell on the stock. The 12-month average price target stands at $16.17, aligning with current levels.

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